After learning that Lenoir City Utilities Board is facing a downturn in funding pension plans, board members voted Monday to move forward with an estimated $1 million project to rehabilitate a sewer sub-basin.

It's been only a couple years since a portion of the Browder Hollow basin was worked on to address overflow issues. The cost of that rework totaled several million dollars, according to water and wastewater manager Herb Sarten, but he believes rehabilitating underground systems, like the Browder Hollow sub-basin, will be an ongoing project for the utility company.

"It's just more work on the same sub-basin," Sarten said. "The problem with RDI, which is rain derived infiltration, is you try to get the worse things first and fix them, but you never get to finish. Anything you put in the ground has a life expectancy when it's deteriorating over time. By the time you fix this part it's time to go to this sub-basin and fix this. For years, all the emphasis was put on growth. Now we are having to go back and look at maintaining."

Sarten said the rehabilitation should include reworking manholes, lines and maybe some line replacement.

LCUB approved an engineering agreement with Fulghum, MacIndoe, Associates, Inc., for the rehabilitation at Monday's meeting. Sarten said the engineering contract will be included in the coming fiscal year, and construction will occur the following fiscal year.

General Manager Shannon Littleton estimated the project will go to bid next spring.

But, LCUB has seen a decline in its pension plan funding percentage.

Terry Moats, a certified public accountant with Brown Jake McDaniel PC, said during Monday's discussion of LCUB's 2012 audit report that a recent change in the way the utility's pension plan is calculated caused the decrease.

"It looks like funding from '03 to '12 has changed a lot," board member Eddie Simpson said during Moats' synopsis of the report.

"Particularly in '12 there is the change in the method of making the calculation. During that time period you've probably had some advanced retirements," Moats said, adding LCUB is about 52 percent funded on its pension plan. "You've had some bad years in the stock market, which has caused your returns to go down. There are several things that have caused your funding progress to not consistently be going up.

"But you've got to continue to see an increase in your percentage of funding, no doubt," Moats added.

Littleton said funding levels in all departments "have all gone up quite a bit" in the past couple months and that the decline was only reflective of the calculation change.

"Our committee felt confident that we are on the right track. We have been thrown this curve ball though with the new standard and regulation. ... Obviously there is a huge push at the federal level to start making these pension levels highly funded, if not more so funded. I think in time we can see some type of taxation structure," Littleton said to the board.

Moats also said the all departments had positive change in net assets, but the water department had negative cash flow.

Moats said he believes LCUB will see benefits in coming years with the utility recently paying off a couple high-interest loans.

"It had a negative impact on your cash flow, which is obvious, but in the future years you're going to see that number drastically reduce on your statement of cash flows, and you should not see that as a continuing trend," Moats said.

Sarten said he hopes to snag a few grants for the sewer sub-basin project.

"We are always looking for funding. We don't have that many sewer customers, and we have spent quite a bit of money on these sewer plants. Now we are working on the collection system, and we are trying to do it but do it as cheaply as possible," Sarten said.

If not, the board hopes to save money elsewhere. Littleton said he hopes to complete portions of the project in-house.

"We are trying to have the least impact to our rate payers because our sewer rates are pretty high because of all the sewer plant work we have to do," Sarten added.

But board members shied away from another purchase on Monday. After a discussion, the board postponed making a decision on whether to purchase a piece of property at nearly $2 million to expand an electrical power substation on Northshore Drive.

"We've talked about this particular sewer system for years and years, and I'm surprised we didn't have something in the budget for this year," Simpson said about approving the engineering contract for the Browder Hollow sub-basin. "We have to move forward with it. We don't want to have anybody on us again saying we're not doing what we were told we had to do."

In other business, the board:

* Recognized Susie Wright and Randy Hamilton for their years of service. Wright has been with LCUB 35 years, and Hamilton has been with LCUB 25 years.

* Renewed the health care insurance plan with Blue Cross Blue Shield. Littleton said the renewal came with no premium increase.

* Adopted a new fire hydrant meter deposit policy. Sarten said the new policy will require a $500 deposit for each customer asking for a fire hydrant meter. Littleton said the deposit will be refunded to the customer once the fire hydrant is returned in good condition.

* Approved a groundwater easement between LCUB and Yale Security Inc., to market the Yale Locks & Hardware property for a future industry. Littleton said if the property is sold to private hands it could create issues since the sewer and water plants are located on the property.

* Adopted a policy program for water leak detection. Sarten said LCUB has water loss across its system.

"Basically it's trying to set up how we will go about trying to find water leaks on our system and do it systematically," Sarten said.a